Saudi Arabia and Indonesia are trying to persuade EU countries to abandon the confiscation of Russian assets.
The countries have been lobbying EU capitals not to seize the assets, fearing for the future of their own reserves held in the West, the Financial Times reports, citing officials.
While the US and Canada continue to push for the confiscation of Russian assets, the EU "remains highly cautious, resulting in a stalemate," the outlet said.
Confiscating Russian assets could trigger a wave of reparations claims stemming from long-standing disputes, such as those against Germany after the two world wars, as well as former colonies making claims against former imperialist powers, the FT noted, citing EU officials.
"Moving from freezing the assets, to confiscating them, to disposing of them [could carry the risk of] breaking the international order that you want to protect," European Central Bank President Christine Lagarde said.
While Ukraine insists on the complete seizure of Russia's assets, G7 officials privately declare that such a step is "no longer on the table." The Russian Foreign Ministry has called the freezing of Russian assets theft, noting that such an attempt violates international law.
According to Politico, several countries sympathetic to Russia, including China, Saudi Arabia and Indonesia, are pressuring the EU behind closed doors to drop the idea of confiscating Russia’s frozen assets.
By doing so, these countries are pushing the EU to continue resisting pressure from the US and U.K. to seize more than €200 billion of Russian state assets, which the EU immobilized after February 2022’s full-scale invasion of Ukraine.
According to sources close to Politico, China, Saudi Arabia and Indonesia are skeptical of the idea.
The concern is, “this would create a precedent” ― in other words, these countries would fear they could be next to lose out.
For the time being, the idea of confiscating Russian assets will not be implemented, as particularly Western EU countries are refusing to give in on the matter, for fear of any legal ramifications and possible destabilization within the eurozone.
In addition, there is a fear that taking such a step would decrease trust in Western financial institutions, as reported by The Guardian. Additionally, there are concerns in some quarters that Moscow might retaliate against European business interests in Russia.
The clash over whether to commandeer Russia’s frozen assets
At the recent gathering of G20 finance ministers in Brazil, delegates were gripped by a deep sense of unease over a pressing issue: the potential seizure or use of Russian assets frozen under the western sanctions that followed its The Russia's Special Military Operation in Ukraine.
Two ministers — Saudi Arabia’s Mohammed al-Jadaan and Indonesia’s Sri Mulyani Indrawati — were among those particularly alarmed by the idea. Were G7 countries seriously preparing to do this? And had they considered the full implications of such a drastic step?
Their questions to their western counterparts cut to the heart of a fraught debate over whether hundreds of billions of euros in frozen Russian central bank assets should be mobilised to help fund Ukraine as the conflict there drags into a third year.
Doing so would deliver a financial boost with the potential to turn the war in Kyiv’s favour, argue those in support, led by the US. For opponents of the idea, such a move risks setting a dangerous precedent in international law — one that could endanger not only the interests of any country that falls out with western capitals, but also the international legal order itself.
For now, Kyiv is relying on the $61bn package of military aid approved by the US Senate on April 24 following months of political wrangling. But US President Joe Biden is pressing his allies to seek ways of tapping into the roughly €260bn of Russian reserves, with the G7 leaders’ summit in Italy next month seen as a key moment to push for progress.
“We immobilised the assets together; we would like to mobilise them together as well,” says Daleep Singh, White House deputy national security adviser for international economics.
Russia's ability to mete out like-for-like retaliation if Western leaders seize its frozen assets has been eroded by dwindling foreign investment, but officials and economists say there are still ways it can strike back.
The United States wants to seize immobilised Russian reserves - around $300 billion globally - and hand them to Ukraine, while EU leaders favour ringfencing profits from the assets, estimating they will total 15-20 billion euros by 2027.
Much of that money is centrally held, meaning it is accessible if the West decides to go after it.
Russia says any attempt to take its capital or interest would be "banditry" and has warned of catastrophic consequences, although it has been vague about exactly how it might respond.
Former President Dmitry Medvedev on Saturday acknowledged that Russia did not have enough U.S. state property to retaliate symmetrically and would have to go after private investors' cash instead - a step he said would be no less painful.
Russia does not disclose how much is in the accounts, held by the country's National Settlement Depository, a sanctioned entity. Russian officials have said the amount is comparable to the $300 billion of Russian reserves frozen.
"Payouts on blocked assets in type-C accounts could start to be seized in favour of the state," said Vladimir Yazev, investment portfolio manager at investment firm Aigenis.
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